New apartment sales crash, projects on hold

Sales of new apartments and launches of new apartment projects crashed in the first quarter of the year, amid weak housing market sentiment and tight credit conditions, according to a new report by property consultants Urbis.

Sydney apartment sales and new projects have crashed. James Alcock

The weakest market conditions were observed in Sydney, where just 4 per cent of apartments in projects surveyed by Urbis sold over the quarter, down from 6 per cent in the December 2018 quarter and 13 per cent in the prior quarter.

Melbourne and Brisbane both recorded low sales rates of 7 per cent down on rates seen in the past 12 months, with the Gold Coast outperforming the major cities, recording 230 sales, equating to 9 per cent of available stock.

“It is likely that we will see the floor of the sales valley in 2019 with a potential increase in sales activity in 2020," said Urbis Group director, Clinton Ostwald.

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Mr Ostwald said the delivery of key infrastructure like Sydney’s North West Metro and Eastern Suburbs Light Rail, Melbourne’s Westgate Tunnel and Brisbane’s Cross River Rail would help stimulate demand once they were completed.

"In the longer term, we expect that areas around West Metro in Sydney, Metronet in Perth and Metro Rail Tunnel in Melbourne will see increased apartment activity," he said.

Alongside the continued downtrend in sales, launches of new apartment projects slumped sharply in the first quarter of the year in all the major cities, compared with a year ago.

In Sydney, where a number of opportunity funds have been formed to buy unsold apartments in bulk at big discounts, new apartment launches were down more than 80 per cent year-on-year in the first quarter, according to Urbis figures.

New apartment launches also crashed by about 80 per cent in Melbourne, where non-bank lenders have replaced banks as financiers of many new projects.

While the Urbis outlook for the apartment market remains bearish in the short term, the surprise federal election result could potentially deliver an earlier than expected turnaround in sales rates, which could then flow through to new project launches as well.

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In the wake of the Coalition's triumph at the polls, APRA relaxed bank lending requirements whilst expectations of a rate cut in June and possibly two more this year, has seen housing sentiment start to improve.

However, a return of foreign buyers to the apartment market would also be crucial to a noticeable turnaround in sales and project launches

Foreign buyers, mostly from Asia, underpinned many project successes in prior years.

But they quit the market in droves when state governments imposed new stamp duy levies on them and local banks stopped providing them with mortgage finance.